Energy Markets Run Out Of Steam, Selling Pushes Refined Product Prices Down

The recovery rally ran out of steam Thursday leading to a wave of selling that’s pushed refined product prices down more than 6 cents in the past 24 hours. WTI meanwhile is threatening to fall below the $60 mark for the first time in 4 months despite multiple new efforts by the U.S. Thursday to tighten the screws on Russian and Iranian supply.

The largest gasoline unit at the Dangote refinery is expected to come back online early next week according to several news reports, which is much earlier than previous estimates. That facility seems to be having a direct influence on RBOB futures as its new production shifts the balance of the Atlantic basin fuel supplies and was importing gasoline into the NY Harbor for the first time before the FCC unit was forced to shut down in September.

Chicago area gasoline is notionally trading below $1.60/gallon this morning with the slide in futures and big negative basis differentials pushing cash prices to a 4 year low. So far, traders in Chicago land seem to be shrugging off the upset at Citgo Lemont earlier this week that ENT reports was contained to a coker unit.

LA area basis differentials continue their slide as Chevron restarts units at its El Segundo facility and damage from last week’s fire appears limited.

The U.S. Treasury department issued new sanctions Thursday on roughly 100 people, vessels and businesses involved with Iran’s oil trade, including a Chinese refinery and a crude oil import terminal.

In addition to the Iran-focused sanctions, the U.S. also targeted a Russian owned company in Serbia that operates the country’s sole refinery with capacity of around 100mb/day.

The EIA highlighted China’s strategic oil reserve stockpiling that has helped prop up global oil prices over the summer. An optimist might say that this is nothing more than the Chinese government taking advantage of discounts on Russian, Iranian and Venezuelan oil that have to get creative to bypass sanctions, while a pessimist may suggest the country may be preparing for a war. Recent reports that the country is expanding their reserve tank capacity will allow them to continue prepping well into next year.

The NHC has two named storms in the Atlantic, but it’s the unnamed system they aren’t tracking that’s expected to bring significant impacts to the East Coast this weekend. Tropical Storm force winds are expected from North Carolina to New England, with some isolated spots predicted to see 80+ mph winds along with heavy rains that will no doubt keep many cars off the road. The handful of remaining refineries along the East Coast should not be at risk of storm surge but power outages certainly could disrupt operations. In addition, it's expected we’ll see vessel traffic in and out of the NY Harbor delayed by high seas which may create for a few days of tight supplies for the waterborne terminals across New England. See the AccuWeather predictions here for more detail.

But I thought RD was clean? The Marathon Martinez refinery was fined a (relatively minor) $375k for multiple air quality violations, a year after the facility was fined $5 million to resolve dozens of similar violations. The published details are scarce, and several news sources confused the Marathon and PBF refineries, so it’s not yet clear if the most recent violations happened before or after the facility was converted from traditional oil refining to a joint venture renewable fuel plant in 2022.